Renewed pessimism among US home builders on housing recovery

15 August 2011 22:49  [Source: ICIS news]

WASHINGTON (ICIS)--There is renewed pessimism among US home builders about prospects for a housing sector recovery, a leading trade group said on Monday, saying that contractors and consumers are too worried about the economy to build or buy.

The National Association of Home Builders (NAHB) said that its monthly survey of contractors’ expectations showed that the housing market index (HMI) held steady in August at the low level of 15.

The housing market index is a compilation of three subsidiary measures:  home builders’ current sales of single-family homes; the number of prospective home buyers visiting model homes and contractors’ expectations for home sales over the next six months.

While there were marginal improvements in the index components for current sales and model home visits, those were offset by a decline in home builders’ expectations for sales over the next six months. 

On the 1-100 HMI scale, a reading of 50 or above indicates that home builders are confident about their prospects over the next six months.

Including the all-time low of 8 in January 2009, the index has been at or below 20 almost continuously for 48 consecutive months.

The housing market index had held steady in the mid-60s, and even reached 70 at times, during the housing boom years of 2002–2005.

“Builders continue to confront the same major challenges they have seen over the past year,” said NAHB chairman Bob Nielsen, “including competition from the large inventory of distressed [foreclosed] homes on the market ... and buyers not being able to sell an existing home or qualify for favourable mortgage rates.”

NAHB chief economist David Crowe noted that while home buying conditions are very favourable - record-low housing prices and interest rates and broad selection - people are wary of making a major purchase.

“Consumers are worried about what the future will bring, and builders are echoing those sentiments in their responses to the HMI survey,” Crowe said. “The uncertain economic climate and concerns about job security are discouraging many potential buyers from exploring a home purchase at this time.”

The US housing industry – especially the construction of single-family homes – is a key downstream consuming sector for chemicals and resins.

According to the American Chemistry Council (ACC), each new single-family home is said to account for some $16,000 (€11,200) in chemicals or derivative products such as plastic pipes, adhesives, insulation, roofing materials, synthetic fibres, paints and coatings.

($1 = €0.70)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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